Biz Partner Transferring Shares To Another Ltd Co

[22s]

Hi all,

I would appreciate some advice on something I have no experience of, if possible.

One of my biz partners "Chris" owns 100% of Company A (ltd co). Chris, another biz partner and I each own 33.3% of Company B (also ltd co).

Chris wants to switch ownership of his Company B shares from himself to Company A (i.e. Company A, not Chris, will now own 33.3% of Company B). The reasoning behind this is that if Chris wants to sell Company A, it makes the business more valuable if it also owns the shares in Company B.

I'm concerned about this, not least because if Chris sells Company A, and therefore also sells 33.3% of Company B, we (presumably) lose the control of that share of Company B to the new owners.

Would you be reluctant to agree to such a movement of ownership, and why? Are my concerns valid or unfounded? Is there a way we can keep control of the company if Company A is sold whilst owning 33.3% of Company B (some sort of shift of voting rights triggered by the sale?).

Any thoughts on this would be welcome, as the situation is making me a little uncomfortable. Chris is a great business partner in every other way, and I'm sure he has no bad intentions, but it just smells a bit funny.

Thanks in advance,

22s

[PugwasHDJ80]

You need legal advice based on whats in the shareholders agreement and articles.

It may depend on whether you have drag and tag rights, and how that effects him.

I would say, as someone who sells companies for a living, that most buyers would run a mile from a company that owns a subsid whtin which they have no control- at the least they would look to push those shares away from the Ltd Co. Thinking it makes company A more valuable is a fallacy.

[Buffalo]

I would fight this very hard if it were me. In effect, your company will have been one third taken over by another company. Whatever happens to that company then (to which you have no say) will effect your livelihood. I'd be very wary.

[AyBee]

Are company A and B related in any way? For example, somebody buying a bike shop may be put off if it also comes with shares in a female accessories business...! I assume this would also cause tax complications for dividends being paid into another company - have you any idea why he wants to do this? Does he want to sell Company A? Might he be trying to amalgamate everything he owns to use as collateral for a loan because Company A is struggling? It all seems very strange but you probably need to talk to him to find out what the real issue is.

[trickywoo]

Unless we are talking plc here and you and the other 33% holder are on the same side the 33% he wants to transfer isn't going to be worth anything more than its share of net assets in the business anyway.

Having recently bought a co-directors share of my business I'd be wary of going into a shared ownership scenario again as even supposedly decent people flip when money is involved.

IMO get your plan in place now for when the st really starts to fly.